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Japan’s free trade agreement tension

The Australian, Canberra

Japan’s free trade agreement tension

By Peter Alford, Tokyo correspondent

5 April 2008

Agriculture Minister Tony Burke has warned the Japanese they cannot have a free trade agreement under the conditions being sought by their negotiators.

"We absolutely cannot agree to the exclusions (of food commodities) Japan is putting forward," Mr Burke said yesterday, responding to the Japanese refusal to make liberalisation offers on wheat, beef, dairy products, sugar and rice - Australia’s main agricultural exports.

With the 15-month-old FTA negotiations to resume in Canberra later this month, Australia and its second-largest trade partner - and still arguably the most important - are at an impasse over Japan’s reluctance to lower the huge tariff and quota barriers around its farm sector.

This tension arises at a time of suspicions in Tokyo that the new Canberra Government’s diplomacy is easing Japan aside to make more space for the Australia-China relationship.

Though most of the noise was coming from Australia, Kevin Rudd was obliged this week to head off a row over Tokyo’s absence from his current tour of world capitals by announcing a hastily finalised summit meeting here on June 11 with Prime Minister Yasuo Fukuda.

Mr Burke came to Tokyo this week to meet his Japanese counterpart, Masatoshi Wakabayoshi, whose Agriculture, Forestry and Fisheries Ministry is once again standing squarely in the path of any FTA that includes meaningful market access improvements.

But Mr Burke made clear the Rudd Government would go without any FTA if the only alternative was one that bypassed agriculture.

In a toughening of the Australian position, the new minister said the question was more than just politics - the previous Howard government, which persuaded the Japanese to negotiate an FTA, had told them an "agriculture-free" FTA waspolitically unsaleable in Australia.

"Certainly, I haven’t put it in political terms, I’ve put it in straight policy terms: that it’s not an option to have an FTA with the exclusions Japan is asking for," Mr Burke said.

Although they support an Australia-Japan deal, Mr Rudd and Trade Minister Simon Crean are more suspicious than their predecessors of bilateral deals, because they potentially undermine multilateral treaties, and insist any agreement Australia signs must be fully consistent with World Trade Organisation principals, including comprehensive farm trade reform.

The last round of FTA talks in late February broke up badly after Japan laid out its demands for widespread agricultural exclusions.

The Australians called the exclusions move "very disappointing" and Japanese negotiators privately described the Canberra position as aggressive and non-negotiable.

Australia has not yet embarked on a free trade negotiation that has failed to produce and agreement and Mr Burke yesterday declined to rule out the possibility the Australia-Japan process would break down irreparably.

"At the moment we’re working towards a win-win outcome and we’re working on the basis we will get there," he said.

"I don’t like going too far down that path of countenancing ’what if everything goes wrong?’."

Japan, which supplies about 40 per cent of its own food requirements, has the highest retail food prices in the developed world. Currently, it imposes a 38 per cent tariff on Australian beef (plus a "snapback" to 50 per cent when annual volumes increase beyond a certain level), more than 200 per cent on wheat, about 770 per cent on rice, and 220 per cent on butter.